On Thursday, the Commerce Department reported that US Gross Domestic Product surged 6.4 percent in quarter 1, according to CNBC.
This marked the best period for GDP since the third quarter of 2003. Economists surveyed by Dow Jones had forecasted a 6.5 percent increase. “This signals the economy is off and running and it will be a boom-like year,” said Mark Zandi chief economist at Moody’s Analytics. “Obviously, the American consumer is powering the train and businesses are investing strongly.”
The surge in GDP saw increases in a variety of sectors, including personal consumption, fixed residential and nonresidential investment and government spending. Decreases in exports and increases in imports dragged down the gains.
Consumers, the largest contributor to the GDP formula, increased spending by 10.7 percent in the quarter. Spending on durable goods increased a whopping 41.4 percent. Consumer spending was largely driven by another round of stimulus checks.
However, many individuals chose to save some of their stimulus money as the savings rate increased to 21 percent, up from 13 percent in Q4.
“With the elevated saving rate, households are still flush with cash and, now that restrictions are being eased as the vaccination program proves a success, that will allow them to boost spending on the worst-affected services, without needing to pull back too much on goods spending,” said Paul Ashworth, chief U.S. economist at Capital Economics.
“The only real drag on the economy will continue to be trade, because the U.S. is way out ahead on the recovery than anywhere else in the world,” Zandi said. “We’re buying stuff and the rest of the world is still not quite there yet. Everything is firing on all cylinders, and we’re off and running.”